Measuring and explaining localisation: Evidence from two British sectors

The degree of localisation of manufacturing, defined as the excess geographic concentration remaining after correcting for both sectorial concentration and the agglomeration of overall economic activity, has recently gained new techniques of measurement. These techniques are illustrated and theoretically discussed. The paper then investigates the sectorial scale of localisation, using evidence from two British sectors, SIC 244 (pharmaceutical) and 334 (optical and photographic), and respective sub-sectors. Applying the measures, it is evidenced that the individual sub-sectors are very differently localized both in extent and in location, even within the same sector. In addition to this, with survey data the paper shows that localisation is due to different economic explanations in different sub-sectors. This is a proof that the economic factors behind localisation are in this case at 5-digit level, making economically not meaningful the measurement of localisation at a different scale. The study implies that identifying localisation remains a delicate process, since the right sectorial scale has to be detected case by case, the use of more than one technique usually gives additional insights and, finally, the survey confirms that, in field studies, a mix of different theoretical models is generally needed to explain the observed patterns.